In a landmark decision that could reshape the gig economy in New Zealand, the Court of Appeal has ruled that Uber drivers are employees, not independent contractors, while logged into the Uber driver app. The ruling, delivered on August 26, 2024, in the case Rasier Operations BV v E Tū Inc [2024] NZCA 403, upheld a previous Employment Court decision, confirming that Uber drivers are entitled to the same legal protections and benefits as other employees under New Zealand law.
The Gig Economy Under Scrutiny
The gig economy, where individuals operate under short-term contracts or freelance work as opposed to permanent jobs, has been under increasing scrutiny worldwide as the popularity of this type of work continues to grow. Companies like Uber have thrived by offering flexible work opportunities that appeal to many, but these opportunities often come without the benefits and protections associated with traditional employment. The central issue in this case was whether Uber drivers in New Zealand should be classified as independent contractors—who have limited legal protections—or as employees, who are entitled to a broad range of rights under the Employment Relations Act 2000 (ERA).
In 2022, the Employment Court ruled in favour of four Uber drivers who took the issue to court, declaring them employees. Uber, arguing that its drivers were independent contractors, appealed the decision. However, the Court of Appeal dismissed Uber’s appeal, siding with the drivers and unions E Tū and First Union, who supported the case.
The Employment Relations Act 2000 (ERA)
At the heart of the Court’s decision is an analysis of the test laid out in section 6 of the Employment Relations Act 2000, which defines who is considered an “employee.” The ERA requires courts to look beyond the terms and labels in contracts to assess the “real nature” of the working relationship. Section 6 of the ERA mandates that courts must consider all relevant factors, including the actual practices and dynamics of the working relationship, not just the labels used by employers. This approach is designed to prevent companies from misclassifying employees as contractors to avoid providing employment benefits.
As stated in an article published on The Law Association website, “Although the written contract between the drivers and Uber stated the drivers were independent contractors, Chief Judge Inglis was able to look past the written contract and conclude various factors revealed a high level of control and subordination, indicative of an employer/employee relationship.”
The Court emphasised that the purpose of the ERA is to protect workers who are, in substance, employees, ensuring they receive the benefits and protections to which they are legally entitled.
Control, Dependency, and Subordination
A critical aspect of the Court’s ruling was its analysis of control, dependency, and subordination—key factors in determining whether a worker is an employee.
Control Exerted by Uber
The Court found that Uber exerted significant control over its drivers. This control included setting fares, determining routes, and managing interactions between drivers and passengers. The Court noted that Uber’s ability to adjust fares, offer refunds, and unilaterally change the terms of service highlighted the level of control typical of an employer-employee relationship. This undermined Uber’s argument that it merely acted as a facilitator between drivers and riders.
Economic Dependency and Imbalance of Power
The judgment also highlighted the economic dependency of drivers on Uber. The drivers were not running their own businesses—they were reliant on Uber for their income. The Court found that Uber’s drivers lacked the autonomy usually associated with independent contractors, such as setting their own rates or selecting their customers. Instead, they were dependent on Uber’s platform to access work, which placed them in a subordinate position similar to that of traditional employees.
The Court also pointed to the significant imbalance of bargaining power between Uber and its drivers. Uber set the terms and conditions without input from the drivers, reinforcing the drivers’ dependency and supporting the Court’s conclusion that they were employees.
Performance Management and Subtle Control
The Court also examined how Uber managed driver performance through its “Community Guidelines” and rating system, which dictated standards of behaviour and service. Failure to adhere to these guidelines could result in penalties, including deactivation from the platform. These controls, combined with incentive programs like dynamic pricing and “Diamond” status rewards, were seen as subtle but effective means of controlling driver behaviour, further evidence of an employment relationship.
The Illusion of Flexibility
One of Uber’s primary defenses was the flexibility it offered drivers in choosing when and how much to work. However, the Court found that this flexibility was largely illusory. Although drivers could theoretically choose their hours, they were subject to various forms of control—such as incentives, penalties, and performance metrics—that effectively dictated when and how they worked. This level of control, the Court said, is more consistent with an employer-employee relationship than with that of an independent contractor.
Employment Documentation Confers a One-Sided Relationship
The employment documentation provided by Uber was another focal point of the Court’s analysis. The Court found these documents to be heavily skewed in Uber’s favour, with terms presented on a “take it or leave it” basis. The documents were seen as being designed to protect Uber’s interests and do not accurately reflect the true nature of the relationship between Uber and its drivers. This mischaracterisation further bolstered the Court’s decision to classify the drivers as employees.
This Could Be a Turning Point for the Gig Economy
The implications of this ruling are profound, not only for Uber but also for the broader gig economy in New Zealand. The decision sets a legal precedent that could affect other platform-based companies that rely on similar business models and companies that utilise self-employed contract agreements. Uber drivers in New Zealand are now entitled to employee benefits under the ERA, including minimum wage, rest breaks, and the ability to lodge personal grievances.
Union leaders and labour advocates have hailed the ruling as a significant victory for workers’ rights. Dennis Maga, General Secretary of First Union, stated, “This will change the landscape of employment in Aotearoa for the decades ahead of us. ” He added, “This decision will ensure more workers are in secure jobs and not prone to precarious and exploitative misclassification by companies like Uber.”
Uber’s Response and the Future
Uber has expressed its disappointment with the ruling and has indicated that it will seek to appeal the decision. Emma Foley, Uber’s Managing Director for Australia and New Zealand, argued that the Court’s decision exacerbates the uncertainty for workers who value the flexibility of contracted arrangements. “There is an urgent need for certainty in the law pertaining to contractor arrangements,” Foley said, emphasising that flexibility and choice are key features of modern work that many workers value.
The case also brings attention to broader legislative issues. As the gig economy continues to grow, lawmakers are under increasing pressure to clarify the status of gig workers and ensure that employment laws keep pace with new forms of work.
Conclusion
The Court of Appeal’s decision in Rasier Operations BV v E Tū Inc is a watershed moment in New Zealand employment law. It underscores the importance of protecting workers in the gig economy by recognising the realities of their working conditions, rather than relying on the labels provided by companies. Conversely, it has sparked debate and concern among organisations that currently operate using gig-work models and highlights the pressing need for more clarity around these laws.
Ultimately, as the gig economy evolves, this case will likely serve as a critical reference point for future legal and legislative developments, both in New Zealand and globally. The ruling not only affirms the rights of Uber drivers but also signals a shift towards greater accountability for companies operating in the gig economy.